Spread Betting Guide

In spread betting the odds are not fixed .You make a prediction and you win if your prediction falls on the right side of the ‘spread’ offered by the company taking your bet.

There are different types of spread betting: financial betting, sports and general. When you place a financial spread bet you are NOT actually buying or selling anything. You are speculating and betting on the rise and fall of prices and indexes and shares. You can place a financial spread bet on The FTSE 100 or on any of the other stock market indices. You can bet on individual shares from any of the markets or on currencies and your predictions for their rise and fall. Bonds, interest rates and all sorts of commodities like gold and oil are subject to these bets.

The best way to understand financial spread betting is to look at a simple example. Imagine you have been following the shares in a company. The spread betting company you have an account with offers a spread of 127p -133p on the share price. The higher number (133p) is the ‘buy’ price and the ‘sell’ price is the lower number, which in this case is 127p. You are betting on the movement in prices of the shares. So you decide that these shares are on the up so you stake an amount on each movement. You decide to stake 10 pound on each movement upwards so you make a ‘buy’ bet for 10 pounds at 133p. The price of the shares does in fact rise and the indexation company now quotes 138p – 145p as the new spread. If you want to cash in your profit you must make a ‘sell’ bet at the ‘sell’ price which happens to be 138p.

You bought at 133 and you sold at 138 so the difference is 5 points. You staked 10 pounds per point of movement so you profit 5 points by your 10 pound stake which is 50 pounds. If the prices fell instead of rising, you would lose 10 pounds for each movement downwards.

With spread betting you can decide to bet on the prices falling instead of rising. You could have decided that the prices would fall and you would have made a profit if they did indeed fall.

You make a profit if the spread moves far enough in the right direction between the time you buy and sell. Your profit or loss is based on the movement and the stake.

You can limit your losses by putting a stop-loss limit on your account.

General interest bets range from spread bets on reality tv shows to election results.

Sports bets can be related to the results, individual scores, times of scores and a whole host of other outcomes. An example of a sports’ spread bet might be say on the timing of goals in a football match. Your spread might be 20 – 26. If your hunch is that the first goal will be earlier than 20 minutes into the game you could ‘sell’ at an amount per minute. Perhaps you decide to sell at two pounds a minute and the goal comes at ten minutes in. You would win 2 x ten minutes. On the other hand if no goals were scored you would lose 140 pounds. (70 minutes x 2 pounds).

Spread betting is gaining in popularity because of the leverage which is a fancy way of saying that your profit can be large even though your stake was small. Remember though that losses can be large too so only bet what you can afford to lose. Take advantage of simulation games online to try out your spread betting strategy before betting for real.

An advantage of spread betting is that it is not subject to stamp duty and there is an exemption amount relating to capital gains.

The main disadvantage with spread betting is that you can lose more than you originally invested. Remember to bet on something you know about. Start small and cash in profits.

It is not subject to stamp duty and there is an exemption on capital gains up to a certain amount.

If you decide that spread betting is for you the first thing to do is to open an account with a regulated company. The indexation company will write to you with details of how to proceed. You will have to transfer money into the account and this varies from company to company. You will have to have enough money in your account to cover a maximum loss and the account will be frozen until that bet expires.